ACKG Limited

If defects are found in deliverables, the Group may face large damage claims or long-term suspension from designation as a qualified contractor. The Group has established quality control departments, conducts reviews by skilled engineers, and has taken out liability insurance to address this risk, but these measures may not fully cover potential losses. A prolonged suspension of designation could directly affect business performance through the loss of order opportunities.

If a serious personal injury or equipment accident occurs at a construction site, it may affect business performance through a decline in customer trust, the occurrence of liability for damages, and a decrease in order opportunities. The Group addresses this through thorough employee training, on-site safety management, and liability insurance, but in the event of an accident, there is a risk that losses may not be fully covered by insurance.

Because the timing of payment for services and the timing of payments such as outsourcing costs differ by contract, the balances of notes and accounts receivable, contract assets, contract liabilities, and work in process can fluctuate significantly at each fiscal period-end even when net sales and order backlog remain at similar levels. As a result, operating cash flow may fluctuate substantially even when operating income remains at a similar level, creating a risk of reduced predictability in cash flow management.

The Group is subject to a wide range of laws and regulations, including the Construction Business Act, the Building Standards Act, the Antimonopoly Act, and the Subcontract Act, and any violation could affect business performance through restrictions on the scope of business activities. The Group promotes compliance-focused management through the development of related internal rules, enhancement of its audit framework, and training of officers and employees, but there remains a risk of delayed response to amendments to laws and regulations or changes in their interpretation.

The Group may continue to pursue business alliances and acquisitions with other companies, and if the expected effects are not achieved for any reason, this could adversely affect its financial position and business results. Specific risk factors include failure of the integration process, failure to realize synergies, and impairment of goodwill.

The commitment line agreement (credit facility of ¥10 billion) concluded with the Group's main creditor banks contains financial covenants requiring (1) that consolidated net assets be maintained at 75% or more of a benchmark value (the higher of net assets as of the end of FY2023 (ended September 2023) or net assets at the end of the immediately preceding fiscal year), and (2) that operating loss or ordinary loss not be recorded for two consecutive periods. Non-compliance with these covenants could restrict the use of the credit facility and impede fundraising.

If a business partner becomes unable to pay or goes bankrupt, resulting in significant uncollectible or delayed receivables, this could affect the Group's cash flow. Although the Group is working to improve its credit management, it is difficult to completely prevent deterioration in the financial condition of business partners, and the impact could be substantial if concentration risk with specific business partners materializes.

If confidential information or personal information of business partners is leaked, this could severely damage social trust and adversely affect the Group's financial position and business results. The Group addresses this through the development of internal regulations and operational rules, but this does not guarantee complete protection against threats such as cyberattacks or internal misconduct.

The Group may procure funds for future corporate acquisitions through borrowings from financial institutions, and changes in interest rate trends or financial conditions could affect its financial position and business results. In a rising interest rate environment, increased interest payment burdens could pressure profitability, and deterioration in the credit environment could lead to higher fundraising costs or difficulty in raising funds.

With active expansion into overseas markets, foreign currency-denominated transactions occur on a regular basis, and fluctuations in exchange rates may affect business performance and financial position. Both yen depreciation and appreciation could affect revenues, expenses, and asset valuations, but the securities report does not specify concrete hedging measures or other countermeasures.